The Dekagram: 5th February 2024

Articles, News

05/02/2024

Solicitors’ Assumption of Responsibility: Miller v Irwin Mitchell LLP [2023] EWCA Civ 53

There was good news for travel solicitors this week, with the Court of Appeal giving judgment for the solicitors in Miller v Irwin Mitchell.

The Claimant was injured on a package holiday to Turkey, when she fell down some stairs in her hotel and broke her leg, eventually requiring an amputation. The Claimant reported her accident to the hotel and the tour operator was informed, but did not inform its insurers. Back in the UK, the Claimant rang the Defendant solicitor’s Legal Helpline. The Legal Helpline operator provided some limited initial advice, including (correctly) that the limitation period was 3 years, and referred the case to the Defendant solicitor’s travel legal group, who got in touch with the Claimant very promptly and sought various documents.

The Claimant took some time to send the Defendant all the documents they had asked for. The Defendant wrote to the Claimant several times reminding her that no action had been taken in connection with her claim. Eventually, the documents were provided and the Defendant was in a position to send a letter of claim to the tour operator. This alleged that the stairs were dangerous and in breach of local standards. The tour operator referred the letter of claim to its insurers. But insurers declined indemnity, because of late notification: the tour operator had been aware of the accident shortly after it occurred, but did not notify until the Letter of Claim. In the mean time, the tour operator went into administration. The Claimant brought a claim against her solicitors.

In the Court of Appeal, the Claimant’s key argument was that, when she first contacted them, the Defendant ought to have advised her to inform the tour operator about the accident. On the first instance judge’s findings, had the Claimant done this, the tour operator would have notified its insurer in time and would not have been in breach of its notification requirements.

The Claimant argued that failing to inform the tour operator carried a big risk: it could result in the tour operator being uninsured and there being no party in a position to meet the claim. The Claimant drew an analogy with the obligation to inform the police of a criminal injury to qualify for criminal injury compensation. The Claimant stated that informing the Claimant of a 3 year limitation period gave the impression there was nothing else that the Claimant needed to do to protect her claim.

By advising on limitation, the Claimant contended, the Defendant assumed a duty to advise the Claimant to take reasonable steps open to her to protect her position – which included contacting the tour operator.

The Court of Appeal disagreed. The Claimant had no legal obligation to tell the tour operator about the accident. This had no bearing on the Claimant’s legal basis for bringing a claim against the tour operator. There were no further steps that the Claimant needed to take. Nor was informing the tour operator about the accident “reasonably incidental” to the question of limitation. 

At the time the Claimant called the Legal Helpline, the tour operator either knew of the accident – in which case, the tour operator could be expected to have notified their insurers – or the tour operator did not, in which case they could not be in breach of their notification requirements.

It was of note that, at the time of the Legal Helpline call, the potential claim was for a nasty leg fracture and not the amputation (which occurred much later). This claim might be within the insurance excess in any event.

And further, solicitors are not usually obliged to advise their clients about the risk of unenforceability of a judgment due to insolvency of the other side unless they are put on notice of financial difficulties (Pearson v Sanders Witherspoon [2000] PNLR 110).

For all these reasons, the risk that the insurer might refuse cover because the tour operator had failed to notify it of the accident was not something of such concern that no reasonable solicitor would have failed to tell the Claimant to contact the tour operator. This was not in the Legal Helpline operator’s reasonable contemplation at this very early stage.

The judge found – and the Court of Appeal accepted – that the Claimant was entitled to rely on the advice that was provided to her by the Legal Helpline. But it was clear that this was not complete or comprehensive advice about the claim, and did not give rise to an additional duty to advise about notifying the tour operator.

Andrew Warnock KC and Andrew Spencer acted for the successful Respondent, instructed by Kennedys

About the Author

Andrew Spencer was called to the Bar in 2004, and is listed in the Legal 500 as a Band 1 practitioner in travel law. He acted for the Claimant in the seminal case of Japp v Virgin Holidays Limited [2013] 11 WLUK 131, in which the Court of Appeal considered the time at which applicable local standards should be determined for the purposes of liability under Regulation 15(2) of the Package Travel Regulations; but he is equally comfortable acting for Claimants and Defendants in all travel related claims.

Competing Insolvency Procedures: Scotland vs Luxembourg

The Outer House of the Court of Session in Scotland was recently required to determine whether to appoint an insolvency practitioner for a company with its major asset in the United Kingdom where there was already a similar person appointed in the EU country in which the company was registered.

Lord Sandison’s opinion in The Petition of Münchener Hypothekenbank eG for an Order in Respect of Seventeen Yellow Crowns SÀRL [2023] CSOH 36 is dated 9 June 2023 but it was published more recently. The petitioner, a German bank, sought an administration order pursuant to Schedule B1 to the Insolvency Act 1986 in respect of a company. The company was incorporated in Luxembourg and its registered office was in that jurisdiction, but its only significant asset was a large office building in Glasgow.

The dispute arose out of a loan agreement made in 2017 for more than £34m. The company’s failure to repay the money constituted a continuing default and the bank argued that it was unlikely to be remedied, such that the company was, or was likely to become, unable to pay its debts (referring to sections 220 and 221 of the 1986 Act); and that there was an admission to that effect and/or the company’s assets were far below the value of the outstanding balance.

The usual advertisements were placed in respect of the petition on 14 March 2023. They led to the involvement of Christian Steinmetz, who on 22 March 2023 had been appointed by the Second Chamber of the Luxembourg District Court as the company’s curateur de faillite (the equivalent of a bankruptcy trustee). Mr Steinmetz, named in the opinion as the respondent to the petition, claimed that the company had never had any place of business or any employees in Scotland and relied on an affidavit to that effect from one of the company’s managers. He invited the Outer House not to exercise its discretion to appoint administrators because that would confer no benefit to the bank or other creditors and he had already been appointed as a bankruptcy receiver. He argued that part of his duties required him to act in the interests of all creditors, including the bank, and that any Scottish administration order would not be recognised in Luxembourg, meaning he would remain in office and the Scottish procedure would delay his obligations. He told the court that he was just as able as a person appointed in this jurisdiction to realise the assets. The respondent accepted that the Luxembourgish order (which had not been challenged by the bank) had been made in breach of an applicable moratorium which came into effect as a result of paragraph 44 of Schedule B1 when the petition had been presented, there had been no Scottish-appointed insolvency practitioner at that time and the court in Luxembourg had been operating within its own jurisdiction.

The bank argued that the company met the relevant definitions in Schedule B1 and that, whilst the court had a discretion whether to wind up an unregistered company, the exercise of jurisdiction was not a discretionary matter; and the question of the company’s principal place of business was not relevant. It further argued that the two threshold tests to make an administration order were met (because the company was, or was likely to become, unable to pay its debts and such an order was reasonably likely to achieve the purpose of administration). The bank accepted that various factors applied in the Outer House exercising its discretion in paragraph 13 of Schedule B1 but relied particularly on the “great weight” to be given to the views of the creditors. It submitted that there was no advantage in leaving the realisation of Scottish property in the respondent’s hands.

Lord Sandison noted that a proper review of the available documents indicated that the court in Luxembourg had been aware of the Scottish petition when it made its order, and it should be presumed that it had taken that into account. The real question was whether the Outer House should exercise its discretion to make or refuse an administration order, and the “settled principles” as to the factors to weigh in the balance (see, for example, Re Hawkwing plc [2023] EWHC 407 (Ch)) did not deal with a situation involving a “prospective competition between an insolvency practitioner already appointed by a foreign court of competent jurisdiction and administrators whose appointment was sought in [the Scottish] courts”. The judge considered guidance in Morris (liquidator of Bank of Credit & Commerce International) [2007] CSOH 165 and Kingston Park House Ltd v. Granton Commercial Industrial Properties Ltd [2022] CSIH 59 which pointed towards the “obvious desirability” for a single court to have overall control, in the context of the “fundamental importance” of the principle of international comity.

Ultimately, the judge determined that a Scottish court should only install an insolvency practitioner competing with (rather than ancillary to) one imposed by a competent foreign court “if there is some matter attending the appointment of the foreign practitioner which this court ought not to tolerate, or if the ability of the foreign practitioner to perform his appropriate functions in this jurisdiction can be shown objectively to be likely to be attended by such difficulties as to make the installation of a domestic practitioner an expedient course of action”. Neither limb of that test was met here: the Luxembourgish court had commenced the liquidation process of a company based in its jurisdiction, did so in accordance with the law of Luxembourg, and was aware of the Scottish petition when it did so. There was no reason to think a realisation of the company’s Scottish property would cost more or take longer if it were done by the respondent rather than a Scottish insolvency practitioner; and modern technology removed any suggestion of difficulty in communication. Accordingly, the petition was refused.

This example of a court in the United Kingdom dealing with an application related to subject matter already being addressed by a properly-appointed counterpart in a competing jurisdiction may point the way for future decisions on related matters involving cross-border interests.

About the Author

William Dean has a busy personal injury practice involving both domestic and foreign accidents. He is a contributor to the Butterworths Personal Injury Litigation Service, in which he is the author of the “Foreign Accidents” section. He also acts in tribunal claims against the Criminal Injuries Compensation Authority, including in cases involving foreign jurisdictions, and is a contributor to the leading textbook in that field.

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